Technological Revolutions and Financial Innovations

Yuan K. Chou

No 901, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In this paper, we study the symbiotic relationship between financial innovation and technological innovation. In particular, we construct a theoretical macroeconomic growth model that correspond to the thesis presented in Perez (2002) that all the technological revolutions and their associated development surges since the Industrial Revolution have been both beneficiaries and stimulants of financial development. We explain the microeconomic foundations of the model and present its steady state solution, emphasizing how the growth rate of the economy depends on parameters characterising the R&D and financial sectors. We then analyze the impact of specific types of financial innovations that predominate in each phase of the technological cycle on the optimum allocation of resources in the economy.

Keywords: Financial Innovation; Technological Revolutions; Economic Growth (search for similar items in EconPapers)
JEL-codes: G20 O31 O33 O41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004
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